DBRS Morningstar Changes Trend on Two Classes, Confirms All Ratings of BX Trust 2018-GW

DBRS Limited (DBRS Morningstar) confirmed its ratings on all classes of the Commercial Mortgage Pass-Through Certificates, Series 2018-GW issued by BX Trust 2018-GW (the Trust) as follows:

-- Class A at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (high) (sf)
-- Class X-EXT at A (low) (sf)
-- Class D at BBB (high) (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (low) (sf)
-- Class G at B (low) (sf)

DBRS Morningstar changed the trends on Classes F and G to Stable from Negative. All remaining classes have Stable trends.

The rating confirmations and trend changes reflect the significant improvements in property cash flows as well as the sponsor’s recent significant investment in propertywide upgrades. In-place cash flows have been improving incrementally over the past 12 to 18 months since the lows experienced amid the Coronavirus Disease (COVID-19) pandemic. The subject loan consists of a $510.5 million first mortgage with $289.5 million in mezzanine debt held outside the Trust, for a total of $800.0 million. The loan collateral is the Grand Wailea, a Waldorf Astoria resort, consisting of a 776-key luxury beachfront resort on the Hawaiian island of Maui. In addition to the collateral portion of the property, there are 120 villas that are third-party owned; however, 62 of the third-party owners participate in a rental management program whereby the hotel receives a fee for use of its amenity space. The underlying loan is interest only (IO) throughout the initial 24-month term and all five one-year extension options. Since issuance, the borrower has exercised three extension options, with the loan currently scheduled to mature in May 2023.

The AAA Four Diamond oceanfront resort was developed in 1991 and features 776 hotel keys, eight food and beverage outlets, 100,000 square feet (sf) of meeting/event space, a 50,000-sf spa, and a 20,000-sf recreation outlet center for children. The property was renovated several times between 2013 and 2018, totalling more than $61.1 million of capital investment ($78,700 per key) to upgrade common areas and guest rooms including approximately $22.6 million ($29,182 per key) since 2015 allocated to guest rooms and suites. According to the property’s website, an ongoing renovation project to upgrade all guest rooms, the spa, and some restaurants has been completed in phases with the work expected to be fully complete in 2022. These renovations were announced in 2020, with the borrower taking advantage of lower bookings amid the coronavirus pandemic to invest in improvements for the property. The loan is sponsored by Blackstone Real Estate Partners, which acquired the portfolio from the Government of Singapore Investment Corp. The hotel has been managed by Waldorf Astoria, an affiliate of Hilton International, since 2013, with the current management agreement running through 2024 with one 10-year extension option remaining.

According to the STR, Inc. report for the trailing 12 months (T-12) ended March 31, 2022, the subject reported an occupancy rate, average daily rate, and revenue per available room (RevPAR) of 52.2%, $845.58, and $441.24, respectively, representing a RevPAR penetration rate of 82.2%. Although the subject is underperforming in comparison with the competitive set, performance has significantly improved from the figures for the T-12 period ended May 31, 2021, which resulted in a RevPAR of $199.11, and the RevPAR for the T-12 period ended March 31, 2022, is well above the issuance figure of $401.56. According to the most recent financials, the loan reported a net cash flow (NCF) for the T-12 period ended March 31, 2022, of $63.2 million, compared with the YE2021 NCF of $60.4 million and DBRS Morningstar NCF at issuance of $47.0 million.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.

Class X-EXT is an IO certificate that references a single rated tranche or multiple rated tranches. The IO rating mirrors the lowest-rated applicable reference obligation tranche adjusted upward by one notch if senior in the waterfall.

All ratings are subject to surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by DBRS Morningstar.

DBRS Morningstar provides updated analysis and in-depth commentary in the DBRS Viewpoint platform for this transaction.

The DBRS Viewpoint platform provides additional information on this transaction and underlying loans including DBRS Morningstar metrics, commentary, servicer-reported cash flows, and other performance-related data. For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is North American CMBS Surveillance Methodology (March 4, 2022), which can be found on dbrsmorningstar.com under Methodologies & Criteria. For a list of the structured-finance-related methodologies that may be used during the rating process, please see the DBRS Morningstar Global Structured Finance Related Methodologies document, which can be found on dbrsmorningstar.com in the Commentary tab under Regulatory Affairs. Please note that not every related methodology listed under a principal structured finance asset class methodology may be used to rate or monitor an individual structured finance or debt obligation.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at info@dbrsmorningstar.com.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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